Whenever an e-commerce business is looking at which digital marketing efforts to invest in, the first thing they should determine is their return on investment (ROI). The ROI allows you to project which efforts are becoming profitable for the company and at the most basic level, concludes which transactions are making the most revenue. So, if this is the first time you’ve heard digital marketing and ROI in the same sentence, it’s worth carrying out the equations yourself to test which investments your business is most benefiting from.
What is marketing ROI?
Return-on-investment (ROI) is a performance measure that’s used to calculate the efficiency of marketing investments. The ROI is directly measured by the amount on return there is on a particular investment, after subtracting the initial investment cost.
How do you calculate your ROI?
If you’re looking to calculate your businesses’ ROI, you’ll need to input your numbers into a simple formula — the benefit (or the return) of the investment is subtracted by the cost of the investment. The result should be then expressed as a percentage or a ratio.
Understanding your ROI
Once you complete your ROI calculation you will be able to use it as a rudimentary gauge to understand the profitability of your investment. So, whether your company is looking to start up some search engine optimization or invest more in pay-per-click advertising, the calculation will help you to interpret the opportunities available before you. This gives you a better understanding of how much you can afford to invest in marketing monthly and be able to calculate your return on that investment to know if you should be putting more money into your digital strategy.
For example, if an e-commerce business owner invests $250 in email marketing, to calculate their ROI, they would need to determine their profits of the investment. So, if one of their monthly newsletters made $1,000 and it cost $125 to create (two newsletters monthly are $250 total, $125 each), the calculation would be, $1,000 – $125 = $875, which means their ROI is 87.5%.
How to get in contact with a profitable ROI marketing agency
When you’re on the hunt for an ROI marketing agency that’s dedicated to increasing your e-commerce conversions, it’s also a good idea to consider non-financial elements as well. These could include how the company is getting you likes and follows on your social channels, traffic to your website or even how well their copy is increasing the trust among your target audience. While all the above are not immediate returns on your initial investment, they do indirectly boost the potential for purchases and allow you to better develop your customer relationships long-term.
Do you have more questions about your marketing ROI and how to strategically use it to increase your conversions? Drop a comment below and we will do our best to answer your questions.